Oil commentary - 18 February 2020

Morning all. Brent is trading at $57.08 this morning, down 0.59 and WTI is down 0.40 trading at $51.45 from last nights close. Henry David Thoreau once said, “Not until we are lost do we begin to understand ourselves”. And this market has lost its way more than the VAR system. I suppose it was a little late, but the market is waking up to headlines that read, “Oil prices fall as market weights coronavirus demand impact”. I mean, really? Did the market need a headline to say, “listen you douche bags, this bug is pretty serious, and China is on lock down so don’t expect demand to be great OK?”. OK, thanks Sherlock. As I mentioned yesterday there is a mitigant for the bulls, and that lies in OPEC+, and quite what they do with any more potential supply cuts. I think Brent has a lot further to collapse before we see any actual decisions being made, or indeed for there to be an actual meeting. I can see the next 4 months being 4 consecutive deferred EGM’s before they meet at their usual bi-annual shindig in June. Keeping a ceiling on the market really collapsing is the, sadly, inevitable news that most of Libya’s supply is disrupted again, production is only a tenth of capacity, but as I have always said, rely on production from such states as Libya at your peril. Analysts are saying that Q2 looks optimistic for oil prices and yes, whilst stimulus measures have been put in place fairly quickly by China at least, the markets have still not seen the impact of quite what the outbreak has done for demand in Q1 anyway. I imagine we will some fairly grim data coming out of both the US in terms of EIA stockpiles and China import figures over the coming weeks before things really look to get any better. Good day.